July, 1930J Operating Costs of Grain Stores 7 



ANALYSIS OF COSTS FROM 41 STORES 



The bu.-^iness transacted in 1928 l)y 41 grain stores has been sum- 

 marized in Table 2. These figures were taken from the cost account- 

 ing outlines. Attention is called to the colunm titled, "Per cent of 

 net sales." It will be noted that the average gross margin for all 

 stores was 11.22 per cent, total expense 10.76 per cent and net income 

 .46 per cent of total sales. Judging the grain stores as a whole on the 

 basis of this sample, they are not making a large net i^rofit. Current 

 ex])enses are distributed under four main heads in the last column as 

 follows: — fixed costs 24.63 per cent, labor costs 51.70 per cent, deliv- 

 ery costs 8.63 per cent and other costs 15.04 per cent. 



Great variations occur in costs between stores as given in Table 22 

 and illustrated in Figure 1. There is a range in total costs per dollar 

 of sales from $.06 to $.18; other costs vary from less than half a cent 

 to about $.07; delivery costs from nothing to over $.02; labor costs 

 vary from $.035 to $.105; and fixed costs vary from $.01 to $.05. 



Although the stores are arranged in Figure 1 in order of increasing 

 costs per dollar of sales, the fixed, labor, delivery and other costs do 

 not increase in the same proportion; i.e., fixed costs may be low, 

 while labor and other costs are high. This is well illustrated by Store 

 8 where other costs are large because of an unusual bad debt item. 

 Just the opposite results are obtained by the manager of Store 6. Here 

 the delivery cost is nothing; the fixed, labor and other costs are low. 

 The primary reason the total costs for Store 6 are lower than for 

 Store 8 is because vearlv sales are so much larger. Total costs of 

 6 were 84488.34 and total sales $70,522.09. making a cost of $.0635 

 for each dollar of sales. On the other hand, total costs for 8 were 

 $7579.16 and total sales $40,924.62. which resulted in a total cost of 

 $.1850 for each dollar of sales. Undoubtedly. Store 8 is equipped and 

 capable of doing twice the amount of business shown in its report. 



Store 47 has exceptionally large labor costs. In this instance, the 

 store is operated by the proprietor. The value of his labor was fig- 

 ured at $35 per week, the rate for proprietors who were on full time. 

 It is possible the manager does not value his time so high; if so, the 

 labor cost per dollar of sales would be reduced. On the other hand, 

 the yearly sales are approximately $18,000. If they were double this 

 amount, all costs would be cut in half and a net profit would result 

 instead of a loss. 



The final results of store operations are presented in Table 22. Di- 

 rect comparisons between total costs and gross margins can be made 

 for each store. In some cases the variations are quite striking. The 

 effect of competition causes gross margins to hold near the 13 and 14 

 cent level even though total costs may exceed this amount. The man- 

 agers do not care to raise the gross margin enough to absorb the loss 

 for fear of losing trade. 



One store had a gross margin of $.1594 per dollar of sales, con- 

 trasted to total costs of $.0784; another of $.1818 compared to $.1007, 

 leaving a net profit of $.0810 and $.0811 respectively for each dollar 

 of goods sold. The opposite condition is tiiie with Stores 179 and 8. 



